Over the past few years, a handful of states has created new self-audit programs designed to increase compliance with their unclaimed property laws. Compliance has traditionally been achieved through audits and/or invitations to participate in voluntary disclosure agreement (VDA) or amnesty programs. These newer programs appear to be more of a hybrid between the two because they involve a third-party audit firm, Verus Analytics (“Verus”) (becoming Kroll Government Solutions effective March 1, 2021). States participating in the self-audit program include Florida, Indiana, Pennsylvania, Utah, and Washington.
How Does the Program Work?
States are sending self-audit outreach letters to various companies throughout the United States. The letters are targeted at companies that appear to have little or no reporting history in those jurisdictions. The targeting of these companies may be based on their presence in the state or other factors, such as size and industry, that lead the state to believe that the companies may be holding unclaimed property reportable to that state. Upon receipt of the outreach, the company is asked to perform the self-review and complete a form by a certain date, typically 45 days. That process is done through Verus rather than the state. Depending on a company’s current process and reporting history, it may be required to conduct a thorough self-review that could reach back several years.
The self-review requires a company review its accounting records to determine if it might have any unclaimed property escheatable to the relevant state. This includes reviewing records such as general-ledger trial balances, outstanding check lists, accounts receivable aging reports, outstanding gift-card data reports, open payable reports, suspended royalties, shareholder listings, and/or any other records related to property owed to third parties in that particular state. Any potential liabilities identified and remitted to the state through this process are not typically subject to penalties and interest.
What Should I Do If I Receive a Letter?
If you receive a self-audit letter from these or any other state, please do not ignore it. Ryan recommends you respond timely to the outreach. The process typically involves logging in to a website with a case number to obtain access to instructions and a worksheet to guide the process. However, before you provide any information or data to Verus, you should insist on executing a nondisclosure agreement.
If you do not respond, your company will likely be put on an audit list for enforcement by the state, which could result in large liabilities as well as penalties and interest. It is important you address the outreach and commence a review of your accounting and unclaimed property procedures to determine if you may be holding unclaimed property.
If you receive such an outreach, Ryan can help you navigate this process. Please contact one of our Abandoned and Unclaimed Property team members for assistance.
TECHNICAL INFORMATION CONTACTS:
Mark A. Paolillo
Principal
Ryan
857.288.1976
mark.paolillo@ryan.com
Susan Han
Principal
Ryan
442.244.2447
susan.han@ryan.com
Jeff Henshall
Principal
Ryan
404.682.1200
jeff.henshall@ryan.com
Christopher Jensen
Principal
Ryan
469.399.4142
christopher.jensen@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.